Why Are Rising Interest Rates Bad for Bonds? – Loan Love’s New Guide Takes a Look at the Relationship Between the Two

A new guide from LoanLove.com helps borrowers to better understand the impact rising rates have on bond prices and vice versa.

  • Share on TwitterShare on FacebookShare on Google+Share on LinkedInEmail a friendRepost This

San Diego, CA (PRWEB) May 14, 2014

LoanLove.com is a borrower advice website that is dedicated to helping people find loans that they will love. With connections to top rated industry professionals, in-depth information and valuable resources, the website has quickly become a trusted destination for current news and expert loan advice. Recently Loan Love posted a guide that help to answer the question “Why are rising rates bad for bonds?” and explains why those who are looking for the best possible home loan rates should be aware of the correlation between these two statistics.

This new guide from Loan Love titled “Rising Interest Rates And Bonds (Who’s to Blame?)” starts by explaining that rising interest rates and declining bond values demonstrate the unique relationship between interest rates and bonds. While most investors will turn to bonds to balance out their investment portfolio, since stocks can experience a lot of volatility, recent times have proven that bonds may not really be the stable anchors that they are made out to be. The fact is that bonds can be every bit as vulnerable to economic changes and many things can impact their value.

The Federal Reserve, for example, will be slowing its bond purchases, leading to an increase in interest rates. The expected result will be bonds with lower prices. But this does not mean that investors should dump their bonds. There are many reasons for fluctuation in interest rates and bond markets and understanding some of these factors and relationships can help borrowers to make the most informed decisions regarding their mortgage loan rates.

Loan Love goes on to say, “Most investors see rising interest rates as the single, largest economic threat to bonds. That’s because in most cases, if you own a bond and interest rates rise, the value of your bond on the open market will fall, with few exceptions. But an increase in interest rates doesn’t necessarily have to harm your investment. If you are gong to hold your bonds till maturity anyway, the value isn’t going to change just because the interest rate bounces around. You’ll still end up with the the amount promised to you when you purchased your bond, all other factors being equal. Things get a bit more complex, however, if you own bonds for investment purposes, where you buy and sell them just as you would stocks. In that case, interest rates become critical factors.”

The article goes on discuss some of the ups and downs of bond prices, and also takes a look at where interest rates are expected to head in the not-too-distant future.

To learn more about the factors that influence interest rates and bond prices, click here to read the full article online.


Contact